Bangladesh garment makers demand 0.30pc tax at source for next FY

The country’s garment and textile makers have urged the government to reduce tax at source to 0.3 percent for the next fiscal year from the proposed 1.5 percent to attract more investment as the cost of production is increasing every year.

Siddiqur Rahman, president of Bangladesh Garment Manufacturers and Exporters Association (BGMEA), at a press meet at the BGMEA office in Dhaka said that if it is not possible, they have urged the government that source tax should remain at the exiting 0.6% for the sake of the growth of export oriented industries and creating more jobs.

BGMEA, Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA), Bangladesh Textile Mills Association (BTMA), and some other platforms related to the sector jointly organized the press conference to voice their concern over the proposed 1.5 percent source tax.

The government plans to reduce corporate tax for the garment sector to 20 percent from the existing 35 percent. But Rahman demanded the tax be set at 10 percent.

He also urged the government to keep all the materials, purchased from the local market, beyond the purview of value-added tax to make export more competitive.

For the sake of market diversification and higher export growth, the apparel manufacturers sought 2 percent incentive on the value of freight on board of garment items bound for European markets and 5 percent incentive for new destinations. Subsequently, he suggested framing the tax policy in such a way that entrepreneurs are able to forecast the tax regime for three to five years.

Textile and RMG sector would be the worst victim of the proposed tax at source. In the proposed budget for the next fiscal, tax at source increased to 1.5% from 0.60%, a 150% rise, for all export oriented-sectors, which will hinder the growth of the sectors.

On the other hand, the government has set 7.2% GDP growth for the next fiscal, which is conflicting with government’s labor intensive industrial policy as 25% contribution comes from the manufacturing sector.

As the production cost has been increased by 8% to 10% due to the compliance issues, the risk factor of the RMG sector has already increased by 30% to 35%. Considering all the aspects, most of the RMG factories would not be able to survive, he added.

FBCCI First Vice President Shafiul Islam Mohiuddin who also stressed on enhancing revenues collection through industrialization said that the government has increased its revenue earning target indiscriminately without considering the consequence on the overall investment
The budget proposal should not be a burden for the investors, which will discourage the investment, a tool for creating new jobs.

The proposed budget has increased tax on chemicals from 3% to 5%, which will ultimately discourage the investments, said AH Aslam Sunny, first vice president of BKMEA.

In September last year, the government had hiked prices of gas by 100% and it has increased tax at source to 1.5%. Now the question is whether the government really wants industrialisation or not, said Md Fazlul Hoque, vice president of BTMA.

If the government continues to impose tax burden one after another on the industry people, it will be very difficult for the industry to grow further.
For this, the government can frame fiscal measures in two phases.

The tax authority would receive proposals from businesses in October, which it will review and discuss with the businessmen during the February-May period.

In that way, the entrepreneurs will know which proposals were accepted and can form an outline of the coming fiscal measures.

The entrepreneurs will be the least disheartened if they are consulted and informed ahead of the framing of fiscal measures. Fiscal instruments should be innovative so that it can support production and investment. It should be framed in a way that it is predictable and transparent.